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No capital gains on transfer of assets meant for charities

I am a senior citizen and a widower without issues. I want to settle my properties and savings in favour of a charitable institution after my death by leaving a will with a direction to the executor to realise the property value by way of sale and donate the sale proceeds to the named charitable institution. Will such sale be liable to capital gains tax reducing the amount intended to be gifted?

If the executor sells the property, capital gains tax is payable, though the sale proceeds are meant for a charitable institution. All that is required to be done is to will the property itself in favour of the charitable institution, so that the capital gains, if any, on sale of the property will be that of the charitable institution, which will be entitled to exemption if it satisfies the conditions therefor as a charitable institution.

There is no liability on gift received, whether as property or cash, for the donee institution. Liability for gifts received from non-relatives as income under Sec. 56(v) is applicable only to individuals and HUF.

Plight of subscribers of NSS, 1987

I am a senior citizen who had banked my savings largely in NSS,1987. I am in the taxable group and any withdrawal suffers tax at 20 per cent. I had the entire deposit allowed as a deduction subject to the condition that I would pay tax at the time of withdrawal. But the Government unilaterally reduced the interest rate progressively so that it has been slashed from 11 per cent to 7.5 per cent. My savings are all trapped under this scheme. If the Government could go back on its commitment to pay interest at the then prevailing rate, it stands to reason that there should be corresponding concession for withdrawal without tax at least by instalments. In the case of senior citizens who have kept the money locked up for nearly a decade-and-a-half, the deposited interest can be returned on a par with provident fund at the end of the 15th year of deposit without tax. At least some other concessions to reduce the rigours of taxation on the bunched income of several years is certainly warranted. Will anyone listen to the anguish of this section of taxpayers?

The grievance pointed out is a legitimate one. Such grievances are aired from time-to-time by several readers. This class of taxpayers already has the experience of what is being proposed now for tax under the EET scheme indicating the disadvantage in merely postponing liability for the immediate gain by way of tax relief. But then it is a bargain.

As pointed out by the reader, the reduction in interest rate is not part of the bargain, because the taxpayer had opted for the scheme also because of the attractive rate of interest without liability for the same unless withdrawn. The Government may think of some concession or at least liquidate the deposit instead of carrying them forward indefinitely till the closure of accounts or death of all existing subscribers, by issuing bonds. These may be redeemed in instalments over the years without tax liability at least to the extent of the principal part, so that the burden on the Government also can be staggered reducing the enormous cost in monitoring these accounts for an indefinite period, while ensuring tax collection from income from such assets after release from the scheme.

S. RAJARATNAM

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